Economy shows resilience, but consumers fear inflation
September’s positive economic data surprises were largely concentrated in the United States and indicated resilience in growth, rather than a reacceleration. The U.S. retail sales report looked strong, but retail sales in real terms declined month over month, based on our analysis of the data. Areas of strength included electronics sales and vehicle sales. Online sales actually ticked down after a couple of strong months. Inflation, as measured by the Consumer Price Index, increased.
The University of Michigan Consumer Confidence Index declined in the early September release. The deterioration involved household finances. Consumer inflation expectations also came down and surprised the markets, which fixated on high gasoline prices. Consumers see gas prices and inflation in a range but are not happy about elevated prices. Durable goods, vehicle, and home purchase intentions declined due to high prices.
The European Central Bank hiked the key policy rates by 25 basis points and signaled the likely end of the tightening cycle. Officials raised inflation projections for 2023 and 2024 while reducing the 2025 inflation projection to 2.1%, slightly above the ECB’s target. The core inflation projections were also reduced a bit for 2024 and 2025.
In China, economic data is showing early signs of bottoming.
This six-year illustration shows stable GDP up until the collapse from the coronavirus pandemic.
Feb '20–April '20
The Covid-19 pandemic causes a global economic downturn.
May '20–Dec '21
Global growth starts to surge and stays at elevated levels as life continues to normalize.
Central bank tightening, inflation, and Russia-Ukraine War increase volatility and uncertainty.
Source: Putnam. Data as of September 30, 2023. We base our Global GDP Nowcast on a tailored methodology that captures daily data releases for the most essential growth characteristics for each of 25 countries — including purchasing managers' index data, industrial production, retail sales data, labor market metrics, real estate price indexes, sentiment indicators, and numerous other factors. The mix of factors used for each market may change over time as new indicators become available from data sources or if certain factors become more, or less, predictive of economic growth.
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